Gold reaches 11-week high amidst Middle East tensions

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Amidst growing tensions in the Middle East, safe-haven buying drove gold to an 11-week high on Wednesday, with the front-month Comex futures price nearing the $2,000 an ounce mark.

Comex data revealed that the front-month contract surged by more than $26, or over 1.3%, reaching just over $1,963 at 7 am, Sydney time.

Over the past five days, Comex gold prices have climbed 4%, as concerned investors pushed the precious metal higher, despite higher bond yields and a strengthening greenback.

This increase occurred despite US bond yields reaching multi-year highs, with the 10-year Treasury bond yield surpassing 4.90% for the first time since 2007. The US dollar also gained strength due to safe-haven buying of greenback-denominated assets.

Comex silver prices also saw a rise, reaching a three-week high of just over $23 an ounce.

The weakness of the Aussie dollar, which fell nearly half a percent overnight to 63.35 US cents, combined with the sharp rise in the Comex price, resulted in the Australian dollar price of gold soaring to $3,076 an ounce. This price surge may buck the weaker trend on the ASX on Thursday for gold miners.

Oil prices also experienced an increase, primarily driven by concerns about supply disruptions due to the Gaza conflict, rather than safe-haven buying.

The demand for safe havens was fueled by the ongoing fallout from a hospital bombing in Gaza, which reportedly claimed the lives of over 500 people. Hamas attributed the incident to an Israeli airstrike, while Israel blamed an errant Hamas missile, a view supported by the US and President Biden, who stated that the "other team" was responsible.

A headline in Barrons read, "Rate fears, bond yields, war; market concern grows."

Jim Wyckoff, senior analyst at Kitco Metals, commented on the situation, saying, "Elevated risks in the Middle East are prompting safe-haven demand for gold, the technicals also have improved. I think gold will push above $2,000 in the near term."

Wyckoff added, "Gold will pull back if the Middle East situation simmers down, but right now the marketplace is expecting a further escalation."

However, some analysts pondered whether this is just a temporary spike in gold prices, with the looming reality of a speech by Fed Chair Jay Powell tonight, Australian time, potentially impacting the precious metal's future performance.

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